ECONOMY

Business crying out for a solution to restore liquidity

Businesspeople appear increasingly jittery about their prospects, seeing that the government has to move fast to tackle the liquidity crisis — the economy?s most pressing problem.

?There is no grace period for the Samaras government. Measures have to be adopted urgently. We are currently drawing on reserves which we would otherwise use for investment and to create new jobs,? said the CEO of a large listed company who asked not to be named.

?We have crossed the red line. Nobody pays anybody. The new government has to give entrepreneurship a push, cut tax rates and reward those companies that still pay their taxes and salaries and create jobs,? another businessman, the head of a large metallurgy group, told Kathimerini.

?We have to see privatizations and a slashing of government expenditure, just like in Turkey in the last decade,? a senior executive at an export-oriented business said.

The disappointing results of the country?s privatizations program and the political instability have created an explosive mix, leading to a sharp deterioration in all industrial indices over the last year or so. A wave of emergency taxes, the lack of liquidity and falling consumption have pushed many listed companies out of the market, restricted the productive potential of others and hit banks? ability to provide credit as deposits have shrunk at a dramatic pace.

If 2008 goes down in history as the worst year in terms of stock market returns, 2011 and 2012 will certainly be remembered as the worst — so far — for the economy of the country since the introduction of the common currency. Even the few remaining sound and profitable listed firms are under constant pressure to seek ways to remain viable. Their biggest problem at the moment is shrinking cash reserves, for the following main reasons:

– Operating losses — in many cases.

– Heavy pressure from suppliers for speedy payment, especially for importing businesses. (Payments from clients are also being delayed, especially when the client is part of the public sector.)

– Difficulties in raising money through share capital increases.

– Limited access to new loans. In most cases, old loans are restructured.

In a bid to deal with shrinking liquidity, firms have restricted investment and are trying to cut operating costs. The stock market has virtually lost all sense of valuation, as there is no consensus among analysts, and predicting project turnover and profits, even on a half-yearly basis, is today all but impossible. Moreover, we can no longer speak of a stock market leader, as was once the case with the banking sector. In technical terms, the general index of the Athens Exchange is at a 20-year low but the composition, structure and participation of investors bear no relation to those of the early 1990s. Now we have a proliferation of instances of extreme pessimism in the behavior of investors, bondholders and depositors in general.